Upping amount high income-earners pay too unwieldy: prof

Hey there, time traveller!This article was published 18/4/2013 (1581 days ago), so information in it may no longer be current.

We may never know if the NDP cabinet and senior Finance Department officials considered taxing the rich instead of hiking the provincial sales tax in order to raise close to $300 million in extra revenue.

But an economics professor at the University of British Columbia figures if they had, they would have concluded it was futile.

TIM SMITH / BRANDON SUN ARCHIVES

Finance Minister Stan Struthers opted for a PST hike.

Kevin Milligan, an associate professor of economics with the Vancouver School of Economics, decided to explore how much more individual Manitobans earning $150,000-plus would have had to pay in income tax to add the same money to government coffers each year as would a one-percentage-point increase in the PST.

Milligan published his findings on Twitter after the budget was released.

His calculations show high-income earners would need to pay 12 percentage points more in income tax to raise the same amount of money. That would send their combined federal-provincial tax rate soaring to 58.4 per cent.

Milligan said Thursday it is no wonder Manitoba opted for a PST hike -- even though it places a bigger burden on low- to middle-income Manitobans.

And if the government had dared to hand thousands of well-heeled taxpayers that big of a bill, it's unlikely it would have been able to collect since high-income earners have the means to hire the best tax advisers.

"The evidence is that some of that potential revenue is going to bleed away," said Milligan, who noted several provinces, including Nova Scotia and B.C., recently instituted tax hikes on high income earners.

The Manitoba Federation of Labour argued increased corporate taxes and higher levies on incomes greater than $200,000 are fairer measures.

Milligan said there are merits to that argument -- as well as to the one the government should tighten its belt instead of raising taxes. "If you agree that the goal is to increase revenue, then the PST looks like a more effective tool."

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